Regulators gonna regulate…
The Commonwealth of Massachusetts has accused Anheuser-Busch InBev of handing out incentives to retailers and bars in the state to push Budweiser beer over other brands. The Wall Street Journal reported:
The state’s Alcoholic Beverages Control Commission has issued a report detailing investigators’ findings and set a June hearing in Boston on the matter. The report alleges a subsidiary of AB InBev gave out bar equipment as incentives to hundreds of Massachusetts businesses in violation of a state law meant to keep beer companies from squeezing out competitors.
Sales representatives “offered the refrigeration equipment to the retailers at no cost, provided the equipment was only utilized for Budweiser products,” investigators said in the report.
AB InBev said in a statement that it has been working with the alcohol commission since Massachusetts first raised questions. “We believe that we lawfully provided branded point-of-sale items to retailers and plan to contest these allegations,” the company said.
Brands make financial agreements with stores over visibility arrangements, but these agreements “are forbidden in the alcohol sector in most states.” Massachusetts does not allow alcohol companies within the state to gift “stores with ‘money or any other thing of substantial value’ to induce retailers to buy certain alcoholic beverages.”
From The Boston Globe:
In a report detailing their 14-month probe of Anheuser-Busch’s aggressive tactics, ABCC investigators concluded that the company in 2014 and 2015 gave away equipment worth $942,200 to 441 Massachusetts alcohol retailers. The finding was based on financial records the agency obtained from Anheuser-Busch’s distribution and sales subsidiary in Medford, which is the exclusive source of Budweiser and the company’s other beers in metropolitan Boston.
The free gear allegedly included 70 “Budweiser signature draft towers,” prominent chrome-plated beer-dispensers that stand apart from other taps along a bar counter and are worth up to $3,500.
Anheuser-Busch also gave away more than 500 Budweiser-branded refrigerators to package stores and other retailers, ranging from basic units worth $500 to more elaborate coolers with video displays worth as much as $5,700, the ABCC said.
Sales representatives for Anheuser-Busch “offered the refrigeration equipment to the retailer at no cost,” investigators wrote, “provided that the equipment was only utilized for Budweiser products.” The company also paid for its delivery and installation, the ABCC said.
But the company has faced these allegations in California. WSJ continued:
California leveled similar charges against AB InBev, alleging that the company fully or partly paid for refrigeration units, televisions and draft systems at Southern California retailers. In March, the state announced AB InBev agreed to pay $200,000 and further train staff to settle the case.
“We have fully cooperated with the California Department of Alcohol and Beverage Control and have addressed issues in a timely manner,” AB InBev said in a statement, adding that its increased training goes beyond what is required in the agreement with the state.
Beer consultant Bump Williams told WSJ that the bigger known beer companies like AB InBev have started to face massive competition from craft beers:
“Shelf space is limited; display space is limited; cooler space is limited,” said Mr. Williams. “Getting that share of mind and getting that share of wallets is intense as I’ve ever seen it.”
U.S. shipments of craft beer have soared in the last decade, hitting 23.4 million barrels in 2016, up from more than 7.7 million barrels shipped in 2006, according to industry tracker Beer Marketer’s Insights. During the same period, domestic shipments of mainstream beer—including brands like Budweiser—fell nearly 13% to 151 million barrels, from 173 million barrels.
The ABCC has a hearing over this issue on June 20.
Rob Burns, founder of Night Shift Brewing and president of the Massachusetts Brewers guild, said the situation mirrors a case against the Craft Beer Guild, which the ABCC investigated for a pay-to-play scheme. Burns told the website Brewbound that he believes “the state will fine the wholesaler rather than suspend or revoke its liquor license given the outcome of past actions.” Burns continued:
Instead, Burns said he expects “a month of people playing nice and sticking to the laws” and then a return “to business as usual.” The state also needs to hold accountable the retailers involved in these alleged schemes, not just the brewers and distributors, he argued.
“The state either needs to increase staff of the ABCC or increase penalties so the risk-reward doesn’t look so high anymore,” he said.
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